Apple Inc. (NASDAQ:AAPL) shares are up more than 3.89% this year and recently increased 0.62% or $1.09 to settle at $175.82. CenturyLink, Inc. (NYSE:CTL), on the other hand, is up 4.08% year to date as of 04/16/2018. It currently trades at $17.36 and has returned 0.29% during the past week.

Apple Inc. (NASDAQ:AAPL) and CenturyLink, Inc. (NYSE:CTL) are the two most active stocks in the Electronic Equipment industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.

**Growth**

Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect AAPL to grow earnings at a 13.23% annual rate over the next 5 years. Comparatively, CTL is expected to grow at a -12.12% annual rate. All else equal, AAPL’s higher growth rate would imply a greater potential for capital appreciation.

**Profitability and Returns**

Just, if not more, important than the growth rate is the quality of that growth. Growth can actual be harmful to investors if it comes at the cost of weak profitability and low returns. To adjust for differences in capital structure we’ll use EBITDA margin and Return on Investment (ROI) as measures of profitability and return., compared to an EBITDA margin of 33.8% for CenturyLink, Inc. (CTL). AAPL’s ROI is 18.30% while CTL has a ROI of 2.90%. The interpretation is that AAPL’s business generates a higher return on investment than CTL’s.

**Cash Flow**

The value of a stock is simply the present value of its future free cash flows. AAPL’s free cash flow (“FCF”) per share for the trailing twelve months was +4.29. Comparatively, CTL’s free cash flow per share was -0.15. On a percent-of-sales basis, AAPL’s free cash flow was 9.5% while CTL converted -0.91% of its revenues into cash flow. This means that, for a given level of sales, AAPL is able to generate more free cash flow for investors.

**Liquidity and Financial Risk**

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. AAPL has a current ratio of 1.20 compared to 0.90 for CTL. This means that AAPL can more easily cover its most immediate liabilities over the next twelve months. AAPL’s debt-to-equity ratio is 0.87 versus a D/E of 1.61 for CTL. CTL is therefore the more solvent of the two companies, and has lower financial risk.

**Valuation**

AAPL trades at a forward P/E of 13.42, a P/B of 6.41, and a P/S of 3.76, compared to a forward P/E of 16.15, a P/B of 0.66, and a P/S of 1.06 for CTL. AAPL is the cheaper of the two stocks on an earnings basis but is expensive in terms of P/B and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Investors often compare a stock’s current price to an analyst price target to get a sense of the potential upside within the next year. AAPL is currently priced at a -8.36% to its one-year price target of 191.85. Comparatively, CTL is -12.06% relative to its price target of 19.74. This suggests that CTL is the better investment over the next year.

Risk and Volatility

To gauge the market risk of a particular stock, investors use beta. Stocks with a beta above 1 are more volatile than the market as a whole. Conversely, a beta below 1 implies below average systematic risk. AAPL has a beta of 1.24 and CTL’s beta is 0.78. CTL’s shares are therefore the less volatile of the two stocks.

**Insider Activity and Investor Sentiment**

Comparing the number of shares sold short to the float is a method analysts often use to get a reading on investor sentiment. AAPL has a short ratio of 1.43 compared to a short interest of 8.10 for CTL. This implies that the market is currently less bearish on the outlook for AAPL.

**Summary**

Apple Inc. (NASDAQ:AAPL) beats CenturyLink, Inc. (NYSE:CTL) on a total of 9 of the 14 factors compared between the two stocks. AAPL is growing fastly, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate, higher liquidity and has lower financial risk. Finally, AAPL has better sentiment signals based on short interest.